Two wholesalers that worked with Apple were also fined. Apple plans to appeal.
Apple has been fined $1.2 billion by a French antitrust watchdog for anticompetitive activities. It is the largest fine ever processed by France’s antitrust regulators, and it follows eight years of preparation on the part of the watchdog.
The decision involves not just Apple but two wholesalers named Tech Data and Ingram Micro, which were fined 76 million and 63 million, respectively. A statement from the French regulator cited the following activity as the basis for the fine:
Apple and its two wholesalers agreed not to compete with each other and to prevent distributors from competing with each other, thereby sterilizing the wholesale market for Apple products.
Explaining the record-high fine, the regulator wrote:
During this case, the Authority deciphered the very specific practices that had been implemented by Apple for the distribution of its products in France (excluding iPhones), such as the iPad… Given the strong impact of these practices on competition in the distribution of Apple products via Apple premium resellers, the Authority imposes the highest penalty ever pronounced in a case (€1.24 billion). It is also the heaviest sanction pronounced against an economic player, in this case Apple (1.1 billion euros), whose extraordinary dimension has been duly taken into account. Finally, the Authority considered that, in the present case, Apple had committed an abuse of economic dependence on its premium retailers, a practice which the Authority considers to be particularly serious.
Apple says it will appeal the ruling and claims said ruling defies legal precedent in France. An Apple spokesperson said the following in a statement:
Apple has been operating in France for over 40 years, and we are proud of our many contributions to job creation and economic development. Our investment and innovation supports over 240,000 jobs across the country. The French Competition Authority’s decision is disheartening. It relates to practices from over a decade ago and discards thirty years of legal precedent that all companies in France rely on with an order that will cause chaos for companies across all industries. We strongly disagree with them and plan to appeal. We are extremely proud to serve our French customers and believe they should be allowed to choose the product they want, either through Apple Retail or our large network of resellers across the country. We will continue to work hard to deliver the best products and services in the market.
The regulator claims Apple and the two retail resellers agreed not to compete and worked to ensure that the resellers charged prices that did not undercut Apple’s prices in its own stores, online or physical. It says that Apple “abusively exploited” distributors’ dependence on it to force outcomes that were optimal for Apple but anticompetitive in the marketplace. And further, the watchdog claims that Apple limited supply of products to resellers to its own stores’ advantage.
Apple’s business practices have also been the target of investigations by several other antitrust regulators around the world in recent months. The European Commission opened a formal inquiry into Apple’s potentially anticompetitive behavior following a complaint from Spotify, and several different US agencies, including Congress and the Department of Justice, have taken similar steps.
This decision comes at a critical time for Apple, as the effect of the global response to the coronavirus on Apple’s manufacturing and supply lines, its imminent product launch plans, its retail operations, and overall demand for its products have caused its stock to drop sharply over the past few weeks.
Apple recently instructed the majority of its employees to work remotely for the immediately foreseeable future, and it announced its annual developer’s conference will be held exclusively online. It also temporarily suspended all production on its Apple TV+ series and told Apple Card users they can request to skip paying their March bills sans interest.
The company also slashed its revenue expectations for the quarter and announced recently that it will close all stores outside of China for the next two weeks. It also announced new App Store policies regarding apps that are related to COVID-19 and users’ response to the pandemic.
All of that is to say this fine came at a difficult time for the company, which is already dealing with a significant crisis. However, an appeal is planned. This move has been eight years in the making, but there’s a ways to go yet before it is fully resolved.
Kate Cox contributed to this report.